“Thank you for your service”… It's Memorial Day weekend, and while my wife and I have never served – we come from families that have. When I was younger, I had older friends that not only served – but several that never came back. My wife and I try to look at Memorial Day as a day when we honor those that have gone before us – forever defending our freedoms.
It’s not easy to make things look easy: Per SG: Sometimes, you don’t need to make things look easy because making them look harder may be a plus. Let’s not forget, the important part is how it makes the recipient feel.
“You’ll know it when you feel it”… Mike Schur, co-creator of Parks and Recreation, said of his entrepreneurial career: “This is not stuff you can read about in a book. This is stuff that you have to experience.” Books allow things to sound easy. Books give you the structure and the words to explain to someone else why they might want to come along with you on the journey. But explaining entrepreneurship is a lot like explaining ‘falling in love’ – most of the time: “You’ll just know it when you feel it.”
The Market:
The S&P is up 9% YTD… and a 1-Year (riskless) T-Bill is paying almost 6%. By the way, Tina Turner – you were: “Simply the Best” … R.I.P.
Question: Will U.S. regulatory pressure on web3 result in reduced web3 investing?
Answer per FW: “When they want to shut web3 down, I say double down. The most powerful technologies send waves of fear through the establishment. When you see that fear in their eyes, invest in the cause of that fear.”
There are 2 economic conclusions here:
- 1. Assuming they get a deal on the debt ceiling that isn't too disruptive economically or financially, it's hard to see much change in the trajectory to the U.S. growth picture.
- 2. If you are under the assumption that we need to see a real slowdown in order to get inflation under control then this is not the end of the rate hiking cycle.
In Bull markets… there's less of a need for stocks in defensive sectors such as: consumer staples, utilities, healthcare and stocks with low volatility. All of the major defensive names are currently making new 52-week lows relative to the S&Ps.
InfoBits:
- Meta released their open-source AI platform… capable of producing speech-to-text and text-to-speech for about 1,100 different languages.
- Morgan Stanley says… “Don’t be fooled into believing that the rally in U.S. stocks is the beginning of a new bull market – because there are many market problems ahead.”
- Consumer spending trends softened in Q1… and Home Depot was spooked enough by their underperformance that they reduced guidance for the full year.
- Home sales have plunged from last year. Sellers feel trapped in their existing low mortgage rates. And buyers believe that prices and rates are too high because inventory is limited.
- Dollar stores could be foods companies’ next growth driver? America’s largest household brands are repositioning their products for the 34,000 dollar stores. The category was the #1-growing food retailer in 2022.
- TikTok will “soon” grant Oracle full access… to its source code, algorithm and content-moderation material as part of efforts to alleviate national security concerns about the app.
- Rest, Relaxation, and Remote Work… are the reasons Marriott and Hilton are joining the ‘extended-stay’ hotel business. Extended-stay occupancy rates are 75% versus 63% for hotels. Marriott is targeting $80/night and Hilton $100.
- It costs retailers $27 to process $100 of returns.
- The percentage of companies above their 200-day avg… is at a YTD low.
- Germany is in a recession… extinguishing hopes that Europe’s top economy might escape such a fate.
- Yeezy’s… accounted for 8% of Adidas’s total revenue and 40% of their profit.
- Nvidia jumped 25% even as revenue fell 13% YoY…. The numbers were not remarkable: revenue fell 13% YoY, and non-GAAP income fell 21%. There were 91 mentions of AI on the earnings call.
- Best Buy CEO Corie Barry reaffirmed that: “We’re seeing a consumer who is exhibiting some recessionary behaviors.”
- Good news for Tesla… Ford has agreed to use their charging stations..
- Amazon has given up a key part of its climate pledge… the part that announced its "Shipment Zero" initiative.
- Neuralink has received FDA approval on their brain chip… that “unlocks human potential – tomorrow.” Their current focus is on quadriplegic patients.
- Uber partnered with Waymo to add robotaxis to its app. The partnership will begin with a set number of Waymo vehicles available for Uber and Uber Eats customers in Phoenix.
- Microsoft is putting new AI assistant tools in everything. It will change the way we use computers.
Crypto-Bytes:
- Happy Bitcoin Pizza Week… 13 years ago Laszlo Hanyecz bought 2 Papa John’s pizzas for 10,000 BTC ($250 million).
- Miners are moving… after the White House proposed a 30% tax on crypto miners' electricity costs, Some are expanding to Iceland while some are opening facilities in Bermuda and Singapore as regulators turn the screws at home.
- Robert F. Kennedy Jr. announced that his campaign… will accept Bitcoin donations. He applauded Bitcoin’s representation of “democracy and freedom”,highlighting its durability and flexibility.
- Bitget received a Polish Regulatory License… as the 5th largest exchange moves further into the EU.
- The Texas House of Representatives… voted in favor of requiring digital asset service providers to have proof of reserves available to protect customers. This could make Texas: ‘Bitcoin Country’ – yee-haw!
- The maker of the Ledger crypto hardware wallet… paused the rollout of a key recovery feature after customers pushed back over worries that "Ledger Recover"could put their secret seed phrases at risk.
TW3 (That Was - The Week - That Was):
Monday: The FED’s Bullard said: “I’m thinking of 2 more rate hikes this year. Markets are ratcheting up expectations for inflation, and U.S. recession probabilities are overstated.”
Tuesday: 2023 has the fourth most extreme Mega-Cap Divergence on record. The Top-10 largest stocks in the S&P have returned +32%, vs the bottom 490 are flat’ish to red. This is NOT a healthy bull market.
Wednesday: The beige book is out and the big take away is: “Inflation is slowing more slowly than hoped", and they ALL agreed that it was very likely that there would be NO RATE CUTS this year – which flies in the face of wall Street expectations. I think that they're leaning toward at least one more hike. If the PCE is hot Friday and the jobs numbers are strong next week, I think Powell goes again.
Friday: We just got a ton of economic news and NONE of it was FED friendly. Core Inflation ROSE to 0.4%, while estimates hoped that it would remain at 0.3%. Incomes rose and consumer spending doubled estimates. Durable goods spending was up 1.1% vs estimates of 0.8%. Our FED has been whining that inflation isn't coming down as fast as they'd like. Well it seems that inflation is no longer falling … it’s rising.
AMA (Ask Me Anything…)
Only in entrepreneurship can 2 + 2 = 10… that is to say when two little things combine to form one huge thing. Per HL: A little cool air from the north is no big deal. A little warm breeze from the south is pleasant. But when they mix together over Missouri you get a tornado. It’s easy to underestimate risk or at least be surprised at what happens – because the initial ingredients seem harmless. The idea that two innocent small things can combine to form one big dangerous thing isn’t intuitive. This same thing happens with personality traits. The right balance is knowing what you’re good at, and not being afraid to say it – while being just as eager to share what you’re not great at.
Next Week: It’s a One-Stock, Stock Market!
Same range – Different day. We ended just north of 4211 on the S&Ps, and we are very close to where markets could break out of this range. But until we officially break to the upside, there is no difference between the 4211 and the 4106 levels.
NVDA saved the markets… Things were ugly earlier this week, and we were threatening to break below the 4106 level – until NVDA’s earnings became the reason to rally. Effectively one stock Nvidia (NVDA) drove order-flow into the monsters of tech (APPL, MSFT, META, AMZN, & GOOGL). NVDA started the week at $305, and ended the week at $390. NVDA had a 4-sigma move – for which the probability was slim and mostly none. We are ‘gamma squeezing’ all over the place – from TSLA to META to MSFT. Had NVDA come out with average or below average earning – markets were set to completely break-down. We are living with a one-stock, stock market.
Updates on:
- XLP – Consumer Staples is a terrible chart and is down -2% YTD.
- XHM – The Homebuilders are up 15% YTD, and could be the SHORT of the year – because interest rates are flying higher.
- IWM – The Small Cap Index is flat on the year.
- SPY – The S&P is up 9% YTD.
- XLF – The Financials are down almost 7% YTD.
- XLE – Energy is down almost 7%.
- DOW – The DOW is flat on the year.
- QQQ – The NASDAQ is the big winner on the year. The marketplace sees that the entire marketplace hinges on a handful of stocks. Ask yourself: How have we been in a 100-point range for 8 weeks – and the VIX is still 18? We should be under 10, but the marketplace is scared of one big tech stock disappointing. If TECH goes, this market is going with it because no other sector has stepped up to help lead this marketplace.
10-Year Rates and a FED rate hike probability… The Bonds have effectively broken. The 10-Year interest rate is at 3.8% and if it gets over 4% - tech will begin to deflate like no tomorrow. On Friday our FED’s inflation indicator (the PCE deflator) came out inflationary and is causing our markets to price in another rate hike when our FED meets in June. And when I add 0.25 to 3.8 – I get a 10-Year rate that’s north of 4%. The XHM (Homebuilders) is barely clinging to ‘hopium’, but another bump higher in mortgage rates is not going to be good for anybody.
It’s all about the fundamentals / technicals… NOPE = it’s all about order-flow. The PPT has found a way to manipulate order-flow to one or two mega-cap tech stocks and the rest of the marketplace is just following along.
U.S. Dollar rally is defensive. The Dollar is clearly in rally-mode, and being used as a ‘flight-to-quality’. SKEW (the ratio of OTM Put Vol. to OTM Call Vol.) is extraordinarily high – meaning a lot of hedging / PUT buying is going on.
TRADE:
- Opened a Call Spread on GLD: BOT the June 30th, +$180 / -$184 spread
- Opened a Synthetic Short Stock position on XHB: BOT (deep-in-the-money), July $79 PUTS
SPX Expected Move (EM):
- Last week – EM = $63. We ended slightly higher on the week, but I remain convinced that breaking out of this 8-week range is going to be violent.
- Next week (4-day week) – EM = $80 = It’s all about the 4211. Why do we have an $80 Expected Move for a 4-day trading week? Everybody from politicians to FED-heads are nervous about what’s coming up. This will be Mr. Toad’s Wild Ride!
TIPS:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1965/oz. & Silver @ $23.4/oz.
- 13 Week Treasuries @ 5.25 to 5.8% / VMFXX
- **Bitcoin (BTC = $26,900 / in at $4,310)
- **Ethereum (ETH = $1,840 / in at $310)
- **Chainlink (LINK = $6.50 / in at $7.17)
- Big Bear Holdings (BBAI = $2.35 / in at $2.90)
o BOT Sept $4 CALLS for $0.35
- DNN – Denison Mines ($1.06 / in at $1.32)
- GLD – Gold ETF
o BOT June 30th, Call Spread +$180 / -$184
- MESO – Mesoblast Ltd. ($3.63 / in at $3.60)
o SOLD July $5 CALLS for $0.85
- NFGC – Newfound Gold ($4.15 / in at $3.75)
o SOLD July & Oct $5.00 CALLS
- TPH – Tri Pointe Group ($29.14 / in at $26.50)
o BOT July $35 Call
Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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